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I have recently started investing in lending club. Very minimum with $25 in each note. I was wondering which is better funding. The small notes vs large notes; 36 vs 60 terms in addition to considering the loan grades, purpose of the loans, delinquency, credit utilization etc.

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I started with lending club about a year ago. I love it. It has been insightful. Off topic, but I am in a loan to a guy who make 120K a year and is regularly late and has a pretty high interest rate. Crazy.

You gain some economies of scale by going with a bigger note. I have $100 notes that I get hit for 2 or 3 cents for a fee, where $25 notes are always a penny. However, I don't think that should be your deciding factor.

I scale my note purchases based on how much I like the status of the borrower. For example, I did $100 (which is currently my max) for a guy with a reasonable loan amount 16K, a stable work history (15+ years), a great credit history, and a great interest rate (16.9%). If one of those things were a bit out of "whack". I might go $50, two $25.

I prefer 36 month notes, really 5 years to get out of debt? It is unlikely to happen IMHO.

Keep in mind that if you invest $100 in a loan, then you get one $100 note. You can't break them up into 4 $25 notes. For that reason, if you are likely to want to sell the note prematurely, keep it at $25. The market is greater.

I've had a lot of success using the trading account, buying further discounted notes for people who want out of lending club, or get spooked by a couple of late payments and a change in billing date.

Another advantage of using the trading account is you start earning interest day 1. I've had new notes take a couple of weeks to go through.

To summarize:

  • I strongly prefer 36 month notes
  • My minimum interest rate is 11%
  • I scale between 25 and 100 based on borrower suitability
  • Borrowing too much money worries me.
  • If a person's occupation is NA, then auto-reject.
  • Not borrowing enough to cover a revolving credit balance; or, borrowing much more worries me.
  • Not having verified income worries me.

There are some other things, but that is the main stuff I look at.

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  • Nowadays, income is rarely verified right off the bat, although if buying traded notes, one can usually examine the loan application and make a purchase decision based on that.
    – Kevin Li
    May 21, 2019 at 17:07

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